Although many experts agree that your super can be safe from bankruptcy, this isn’t always the case. Should the owner of a super file for bankruptcy, their trustee isn’t likely to be able to access the funds in the super for the purpose of paying creditors.
This is because in bankruptcy, the super is a protected asset. But only if the fund has elected to become regulated. This is stated in Section 19 of the Superannuation Industry Act of 1993.
It is possible that super contributions can be found to prevent, delay or otherwise hinder the transferred property from being able to be divided among any creditors. This can make it able to be attacked by a trustee in bankruptcy. As such, the superannuation advice here is to carefully document any planning strategies to make the purpose of contributions evident. This will result in minimized risk that the super will be used in bankruptcy.
How to Keep Your Retirement Money Safe
In addition to ensuring that the superannuation fund of which you are a member is a regulated one, there are many things you can do to prevent access to your super in the event of bankruptcy. One is to establish a contribution pattern which consists of both non-concessional and concessional contributions. Experts advise that contributions be made especially following the receipt of a large sum of money via an inheritance or other means.
Concessional contributions are advised to be maximized for the purpose of minimizing assets. This will leave less for creditors to claim while simultaneously increasing your tax benefits. The amount you can contribute will vary and depend on how much is in your super and how old you are. In this case, it may help to seek the advice of a professional. If you are under 60 years of age, a $25,000 annual cap is applied. Those over 60 must adhere to the $35,000 cap.
To get the most from your super when you’re ready for retirement while you establish your contribution pattern, non-concessional contributions are necessary. If you are under 65 years of age, you can contribute a maximum of $450,000. This can be done by bringing two years of contributions forward. Those over 65 can contribute $150,000 annually.
The Self-Managed Fund and Bankruptcy Security
Those with a SMSF should check to confirm their fund has a corporate trustee and not an individual one. This is because any assets of the SMSF are owned by the trustee, and not the individual members of the fund. Therefore, in the event of bankruptcy, a member with an SMSF having a corporate trustee would not generate any dispute of the ownership of the funds.
Even with all available information about bankruptcy and your super, the details can become overwhelming. If this is the case, we’re happy to help; you can download our free eBook for retirement and superannuation advice, or call us for more information.
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